How BW Build Warranty® can help developers protect themselves during the 2yr defect period within 10yr Latent Defect Insurance  

Latent Defect Insurance, commonly known as Structural Defects Warranties, is a type of coverage that protects property developers and homeowners against hidden or structural defects in newly constructed buildings. Traditionally, this insurance policy includes a 2-year defect period, during which any faults or issues that arise in the property are the responsibility of the developer. However, the option to protect the developer during this period has been limited until now.  

Personal and Cross Company Guarantees: A Negative Burden for Developers 

In the past, developers have been required to provide personal or cross-company guarantees to cover any potential defects that may arise during the 2-year defect period. While this may offer some reassurance to purchasers, it puts a significant financial burden on developers. Personal guarantees hold developers personally liable for any defects, potentially risking their personal assets in case of major structural issues. Cross company guarantees, on the other hand, may require multiple companies within a development group to be jointly responsible for any claims. This can lead to complex legal and financial entanglements, making it an undesirable option for developers. BW Build Warranty® offer cover without this requirement, making their policies more appealing to developers.  

The Big Positive: 2 Year defect liability period covered by the Insurer 

An attractive alternative for both developers and purchasers is the option for the insurer to cover the 2-year defect period. Under this arrangement, the latent defect insurance would take effect immediately upon the property’s completion and last for an agreed-upon period, typically 10 years. This has several significant advantages: 

  1. Enhanced Buyer Confidence: With coverage from completion, purchasers can rest assured that they are protected against structural defects for an extended period, even after the initial 2-year period has passed. This increased buyer confidence can lead to higher demand and faster property sales. 
  1. Reduced Developer Liability: By removing personal and cross-company guarantees, developers are relieved of the financial burden and personal risk associated with defects claims. This allows developers to allocate resources more efficiently and focus on delivering quality projects. 
  1. Long-Term Structural Protection: A longer coverage period offers a more comprehensive safety net for purchasers, safeguarding their investment for an extended duration. This is particularly valuable in instances where latent defects may not become apparent until years after the property’s construction. 
  1. Attraction for Investors: The option of the 2-year defect liability period being covered by the Insurer makes properties more appealing to potential investors, as it minimises their exposure to risks and uncertainties associated with pursuing the builder during this period for structural defect remediation. 

In conclusion, the option for the insurer to cover the 2-year defect liability period and offer coverage from practical completion is a significant positive for both developers and their purchasers. It provides a win-win scenario by reducing developer liabilities, offering an extended safety net for buyers, and attracting more interest from investors. This approach enhances overall confidence in the property market, fostering a mutually beneficial environment for all parties involved. 

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